China Lawyer Blog

Mar24

China Intellectual Property Licensing Agreeemnt

Introduction

A licensing agreement can be used when you (the licensor) grant certain legal rights to another business (the licensee) to use your intellectual property (IP) under licence. If you license another business to use your IP, that business is allowed to sell products and services based on it. In return, they pay you royalties based on the income that your IP generates for them.

The agreement needs to set out the relationship between the licensor and the licensee clearly to avoid ambiguity.This document illustrates the types of clauses you might find in an IP licensing agreement. It refers to clauses that you might find in all licences, regardless of the IP, and clauses that are more specific to particular types of IP.

Please note that you should always seek professional advice from an IP lawyer when drafting a licensing agreement.

DATEThis normally refers to the date that the licensing agreement is signed by both parties. Sometimes it may refer to a specific date upon which the licence is to start, or it may link the start date to a specific event (eg, the date of delivery of certain technology to the licensee).

PARTIESThe names and details of the licensor and licensee, eg:[COMPANY NAME], a company incorporated in [China] (registration number [number]) having its registered office at [address] (the 'Licensor'); and[COMPANY NAME], a company incorporated in [China] (registration number [number]) having its registered office at [address] (the 'Licensee').

China Patent Due Diligence

Due diligence is a necessary first step before embarking on any kind of business transaction and particularly important when considering entering into a long-term business relationship such as a license agreement. If you would like to do a patent due diligence in China, we advise you to retain our China Patent lawyer to do this job. Having identified one’s short- and long-term strategic objectives and how entering into a licensing agreement, whether it is to license-out technology or to license-in technology, fits into those objectives, it is imperative to engage in an exercise of due diligence. Such an exercise is the process of gathering as much information as possible on the potential licensor or licensee, the technology and other similar technologies available in the market or being developed, the market, the legal and business environment (local or international, as the case may be) and any other information that would enable the potential licensor or licensee to be better informed. The exercise must be conducted in a legitimate manner, keeping in mind one’s financial and time constraints, and undertaken within the bounds of the law.

It is difficult to prioritize or identify any one or more items of information as the most important in a due diligence exercise and it would be misleading to do so. What information is important depends on a variety of factors which vary from situation to situation. However, it may be useful to point out that in a due diligence exercise information is often sought with respect to the following: the ownership of the technology, is it proprietary and have all proper procedures been followed to ensure its protection in the relevant markets, are there any third parties claiming rights over the intellectual property asset, can it deliver, in that, will it serve to reduce costs, improve performance or deliver other identifiable benefit, do other intellectual property rights need to be acquired to fully implement the technology in question, what in fact is its economic and strategic value, in that, to what extent does it fit into and further the business objectives of the alliance?

China Severance Pay Agreement

A very important remind for those foreign employees: you have to hold a working visa and work permission booklet in order to get any severance pay. Check with your employers, whether they have applied for a work permission booklet for you.

Severance pay, also called separation pay, termination pay and continuation pay, is money (and benefits) provided by the employer to an employee who is laid off, fired, or resigns. On top of a specific contractual obligation, an employment policy or practice, China employers are required to provide severance pay is a default rule. Many employers, however, offer a severance pay package in exchange for the employee's agreement not to sue (release of claims against the employer).

What Does A Severance Pay Agreement Typically Require?

For a severance pay agreement to be valid there must be a bargained for exchange. Both the employer and the employee must give each other a benefit not required under the law. The employee, for example, may agree to: (1) release claims against the employer; (2) continue working for a period of time; or (3) provide a certain amount of notice before quitting in exchange for a severance pay benefit. The employer, may agree: (1) to pay a "lump sum" payment, or an additional 1 week's wage for each year the employee worked for the employer; and/or (2) to provide certain benefits such as a letter of recommendation, an educational course(s), a continuation of health benefits for a specified period of time, use of the company's office to look for a new job, etc..

China General Partnership Agreement Sample

The following partnership agreement is a typical partnership agreement used in China. The agreement includes basic terms and conditions of main concerns of the partners. Please keep in mind that you have to retain lawyers to draft the agreement for you according to you specific circumstance. If you are in Beijing, you should find a Beijing lawyer; if you are in Shanghai, you should find a Shanghai lawyer.

This Partnership Agreement is made on [Insert Date] between [Insert Name of Party 1] and [Insert Name of Party 2].

1.Name and BusinessThe parties hereby form a partnership under the name of [Insert Business Name] to produce [Insert Business Product/Service]. The principal office of the business shall be [Insert Address].

3.CapitalThe capital of the partnership shall be contributed in cash by the partners as follows: • A separate capital account shall be maintained for each partner. • Neither partner shall withdraw any part of their capital account. • Upon the demand of either partner, the capital accounts of the partners shall be maintained at all times in the proportions in which the partners share in the profits and losses of the partnership.

Why and How to Draft a Partnership Agreement in China

The biggest mistake made by partnerships is not having a well drafted partnership agreement. Although China law does not require a partnership to have a written agreement, a well written partnership agreement is strongly recommended because: (1) the default partnership rules typically do not mirror the partners' intent; (2) a clearly written partnership agreement will set forth the essential terms and outline each partners rights and responsibilities, and (3) should a dispute arise between the partners, the partnership agreement will help to resolve a dispute that otherwise might cost tens of thousands of dollars to litigate.

China Law When There Is No Written Partnership Agreement.

When a partnership is formed without a written agreement, the rules set forth under General Principles of the Civil Law of the People's Republic of China(GPC) apply. Pursuant to GPC, absent a formal written agreement to the contrary, all partners are considered to be equal partners. Thus if you intended to have a 60-40 split, too bad. Under GPC the default is 50-50 - each partner owns an equal interest in the partnership, has an equal right to operate and manage the partnership business, is entitled to an equal share of the profits, and is 100% responsible for any and all debts and obligations incurred by the partnership business (even when one of the partners didn't know about the debt or disagreed about incurring it. Unless there is a written agreement that specifies otherwise, GPC provides that disputes are settled by a majority vote of the partners and changes to the partnership agreement must be by unanimous vote of the partners. If there are only two partners, and the partners don't agree, under GPC the partners would be forced into litigation to resolve their dispute. If this is not the agreement you want to have with your partners, it is especially important to have a well written partnership agreement.

How to draft a Proforma Invoice - Proforma Invoice Sample

A proforma invoice is an invoice which sets out the terms of the sale and payment arrangements which will be required after completion of the sellers part of the deal. For example, if payment for goods is to be supplied against payment by letter of credit then the pro forma invoice will be sent to the buyer then taken by him to the bank which opens the letter of credit.

The bank will prepare a letter of credit setting out the required documents against which payment will be made. Then the commercial invoice (the one actually being paid against and being entered in the sellers accounts) will be submitted to the bank with other required documents and if all is in order the bank will make payment against that commercial invoice.

In short, a proforma invoice is like a draft invoice from the seller subject to approval by the buyer. A Proforma invoice is an invoice provided by a supplier in advance of providing the goods or service. A quotation in the form of an invoice prepared by the seller that details items which would appear on a commercial invoice if an order results.

Pierce Corporate Veil Rule and Assets Protection in china

How A Corporation Provides Asset Protection.

A China corporation can protect (shield) the owners personal assets from the corporate debts, liabilities and obligations. Shielding personal assets from corporate liabilities (Asset Protection) is generally one of the primary purposes of incorporation. However, many business owners who have incorporated their business do not realize that the law allows creditors, and other claimants, to "pierce the corporate veil" of improperly maintained corporations. If a creditor pierces the corporate veil, the creditor can go after the owner's personal assets (home, bank account, investments, and other assets) to satisfy corporate debt, obligations and liabilities. The theory behind this legal concept is that shareholders who blur the distinction between the corporation and themselves should not be allowed to hide behind the corporate veil. To preserve your personal liability protection, to protect your personal assets, your corporation must be considered an entity unto itself, separate and distinct from its shareholders (owners)—you!

How Shareholders of a China Corporation Lose that Asset Protection - Piercing The Corporate Veil.

To "pierce the corporate veil" of a China corporation, a court must find: (1) unity of interest and ownership between the corporation and the shareholders such that the identity of the corporation and the individual shareholders are no longer separate; and (2) that to preserve the corporate identity and allow its owners to dodge personal liability would cause an inequitable result. The key to protecting the personal liability protection afforded by the corporation to its shareholders is for the shareholders to treat the corporation as a separate and distinct entity by carefully maintaining the corporation's separateness through issuance of stock, adequate capitalization, observation of the corporate formalities, proper maintenance of the corporate minute book, and proper maintenance of financial records. These actions will help prevent a potential plaintiff or litigant from proving unity of interest and ownership between the corporation and its shareholders (owners)(some language of this test is similar with U.S. law, because the pierce corporate veil rule of China company law is originated from U.S. law).

Difference among mediation, arbitration and litigation in China

As an China international arbitration lawyer and China litigation attorney, I have always want to talk about the difference among mediation, arbitration and litigation in china.

Many people want to know what litigation is, what the ramifications of litigation are and whether there are any alternatives to litigation. Generally, litigation is when one party sues, or files a lawsuit, against another party. The filing of the lawsuit kicks off litigation and the parties are now involved in a lengthy battle that can be extremely expensive as well as emotionally draining. Once in litigation, you are officially under the jurisdiction of the relevant court system. This means your attorney will be working with opposing counsel, judges and their clerks. The lengthiest and most challenging aspect of litigation, prior to trial, is discovery. This is where both parties engage in fact finding to strengthen their case. Discovery can be extremely expensive especially when a case is complex and involves multiple expert witnesses. Finally, if the case has not settled, litigation ends in a trial. Trials are held in front of judges, in the presence of a jury and the jury returns a verdict in favor of a party.

There are several alternatives to litigation, which can occur contemporaneous with litigation, including Mediation and Arbitration. Mediation is a way to facilitate settlement of one’s claim through the use of a neutral and detached umpire. Normally the mediator is chosen with the consent of both parties or may be selected by the court in the case that a judge has ordered the parties to take part in mediation. The mediator does not act like a judge; rather, the mediator attempts to point out the strengths and weaknesses of ones case and highlights other factors that the parties may not have considered. Moreover, the Mediator does not offer legal advice nor does he represent any of the parties present – he is neutral and detached. Mediation is a useful approach as it may result in settlement of the claim, or, at the very least, the parties leave the mediation with an understanding of how far or close the two sides are to settling their case.

Arbitration is similar to a trial. An arbitrator presides over the proceedings (there may be more than one arbitrator present) and makes findings of law and facts and writes an opinion. Arbitration may be binding on the parties. Typically, there will be three arbitrators involved where each party selects an arbitrator and then the two arbitrators select a third. At the conclusion of the arbitration, the arbitrators will draft a written opinion deciding who is victorious. If the arbitration is binding, then the opinion is also binding; if not, then the arbitration decision may be appealed.

As one can imagine, the different forms of alternative dispute resolution have drastically decreased the amount of litigation that takes place and, even more so, the amount of trials held. However, just like litigation, Arbitration and Mediation require much preparation and skill. It is not advisable for one to engage in the foregoing alone. You should seek the advice of an attorney who has experience litigating, arbitrating and mediating cases.

We cannot say arbitration, mediation and litigation which one is better. We have to choose according to specific circumstance of each case.

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Peter Zhu, an experienced China attorney licensed to practice law for more than ten years, the author of this China Lawyer blog, welcomes any enquiry or consultation related to Chinese law.